Report of CGAP Multi-Donor Mission: Microfinance in Yemen

This report outlines the conclusions of a research mission that CGAP conducted to check the suitability of Yemen as a site for a pilot program for scaling up microfinance in the Middle East. The report builds on a desk review and consultation with donor staff, representatives from the Yemen Government, microfinance experts and 'Social Fund for Development' (SFD).

It consists of three parts:

• Part 1 provides the background and outlines the scaling up of microfinance in Yemen;
• Part 2 constitutes a diagnostic assessment of the current legal and regulatory framework for microfinance in Yemen including:
  • The legal forms used to carry out microfinance;
  • The laws and regulations in the banking sector;
  • The legal and practical feasibility of "transformations";
  • Legal and regulatory factors that affect microfinance, such as interest rate policies, tax issues and credit information services;
  • Policy-related obstacles to the further development of microfinance.
• Part 3 discusses the prospects for scaling up microfinance in Yemen with particular attention to outreach in rural areas.

The report concludes with recommendations for improvement in the following areas in order to scale up microfinance in Yemen:

• Policy reform;
• Capacity building;
• The creation of an apex facility for funding;
• Building the transparency infrastructure;
• Bank downscaling;
• Opportunities in agricultural finance.